Economics Answers

With the help of Lucas' model, show how supply and demand shocks are mitigated in the presence of rational expectations and Lucas' supply curve.

How does the 'efficiency wage' prevent the economy from achieving full-employment?

ABC ltd has a machine bought at Kshs 15milliom. The total depreciation provided to date is
Kshs 3.4 million. The firm decides to trade in the machine with a new one costing Kshs 20
million. The supplier of the new machine has agreed with the firm that the old machine is worth
Kshs 2.3 million. The difference will be paid by cheque. Prepare journals and ledgers for this.

What are the issues/problems in the Agricultural sector, Industrial sector, Service sector, Informal sector, and International Trade and what are the possible solutions to these issues or problems of each sector

a) If you have Cobb Douglas utility function ……………………………….. ( 7 marks)
U: U (x. y) = x0.5 y0.5
Assume that the consumer is able to spend $40 on goods b, and c. where Px = 1, and Py= 2. Find the maximum quantities of b, and c the consumer can afford to buy and give him the highest utility.

According to department of Labour's new rates domestic workers working in area A (bigger metropolitan areas)who work more than 27 ordinary hours per week, must be paid minimum wage of R13,69 per hour.
Workers who works fewer than 27 hours per week must be paid a minimum wage of 16,03 per hour.

With the aid of a diagram, discuss the welfare effects of this new legislation if the new minimum wage is (1) below the equilibrium wage and (2) above the equilibrium wage rate with labour hours as your quantity variable

Explain the concept of excess capacity under monopolistic competition.

4. Any monotonically increasing function of a utility function, is itself:
a. A utility function, with both functions representing the same preference ordering
b. A different utility function, with both functions representing the different preference ordering
c. A utility function, with both functions representing the different preference ordering
d. A different utility function, with both functions representing the same preference ordering

5. tru or flase:The elasticity of substitution, states how the composition of bundle Z: (b, c), defined as a ratio c/b on any curve changes with the MRS.

suppose the market for grass seed can be expressed as follows demand =100-2p and supply =3p at the equilibrium ,calculate the price elasticity of demand and supply